Tennessee Commercial Lease Agreement Template
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A Tennessee Commercial Lease Agreement is essentially a joint agreement between you and the property owner. This covenant grants you the privilege to utilize a space for your corporate undertakings, for a consensual duration and at a settled cost. It's customized to the specific operations your enterprise plans to perform there. Ensure you comprehend every section prior to affixing your signature.
What are the related laws for Commercial Lease Agreements in Tennessee?
Title 47, Chapter 2A of the Tennessee Uniform Commercial Code explicitly pertains to leases. This encompasses various methodologies, descriptions, and regulations that oversee the creation, alteration, execution, and infringement of lease agreements.
As elaborated in certain sections of the chapter:
- Section 47-2A-103 provides definitions, enumerating multiple expressions associated with lease contracts and their particular interpretations.
- Section 47-2A-219 addresses risk of loss circumstances, illustrating when and under what conditions the liability of loss from goods transpires.
- Section 47-2A-506 establishes the statute of limitations for resolving lease contract concerns. It specifies that parties can diminish the limitations duration to a minimum of one year.
Laws — Title 47, Chapter 2A: Tennessee Uniform Commercial Code
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How to write a Commercial Lease Agreement
As an entrepreneur, you could feel overwhelmed by the intricate legal terminology at play. But armed with an unambiguous guide and optimal direction, you can author your lease agreement with confidence. Let's delve into the basics of a commercial lease agreement and how to adapt it to suit your requirements - envisage this as your cordial, uncomplicated manual to traversing the world of commercial leases.
1. Permitted Uses
The "Permitted Uses" stipulation advises how to employ the leased property. It unambiguously delineates the sanctioned undertakings. Examples encompass manufacturing procedures, administrative labor, storage, dissemination, and generating and distributing merchandise.
It's essential to precisely enumerate all your anticipated commercial endeavors here. This lucidity aids in averting possible legal complications and guarantees effective resource distribution. Incorporate every specification to elude unanticipated development. This comprehension retains your enterprise's progression.
Industrial and light manufacturing, warehousing, office, distribution, and assembly, including designing, manufacturing and distributing branded merchandise and promotional products, including all activities incident or ancillary thereto and all other lawful uses and purposes.
2. Term and Option to Extend
(a) This pertains to the lease duration and elongations. It commences on the Inception Date and concludes on the Termination Date. You have the option to prolong it for two additional biennial periods under equivalent stipulations, though rental charges may rise. Alert the property owner in writing 30 days preceding term end to elongate.
(b) "Duration" denotes both your initial lease span and any elongations.
Explicit lease durations are fundamental for strategic business planning and functions, as well as potential elongations.
(a) The initial term of this Lease will commence on the Effective Date and expire on the Expiration Date. The Tenant may extend the Term of this Lease for [two] additional [two]-year extension term(s), on all the same terms and conditions (except for Rent, which will increase during extension Terms as provided below) contained in this Lease, by notifying the Landlord in writing of the Tenant’s election to do so not less than 30 days before the expiration date of the then-current Term, as the case may be.
(b) The initial term and any applicable extension term are referred to in this Lease as the “Term.”
3. Repairs and Maintenance
The "Repairs and Maintenance" provision sheds light on who takes care of repairs. It encompasses both interior and exterior concerns, such as malfunctioning pipes or impaired masonry. The expense is the landlord's responsibility, not yours.
If a repair isn't resolved promptly, you can coordinate the maintenance and deduct it from your rent. Be sure to record these occurrences for later use. This provision is crucial, as it establishes repair accountability and safeguards you from unforeseen costs.
From and after the Effective Date, and for the remainder of the Term, the Landlord shall perform ordinary maintenance and repair of the interior of the improvements on the Premises. In addition, the Landlord shall, at its own cost and expense without reimbursement by the Tenant, keep and maintain in good condition and repair, and make all necessary repairs and replacements to, the exterior walls, building slabs, foundations, structural parts and components, parking lots, gutters, downspouts, roof, roof membrane and coverings and any other part, component or system on the exterior of the Premises. The Landlord shall, at its own cost and expense without reimbursement by the Tenant, keep and maintain in good condition and repair, and make all necessary repairs and replacements to the sprinkler system, mechanical, HVAC, electrical and plumbing systems of the Premises. If the Landlord fails to perform any repair or replacement required to be made by the Landlord in this Lease, and the Landlord fails to cure such failure within 15 days after receipt of a written demand from the Tenant (or immediately, in the case of emergency repairs, including loss of heating and air conditioning), then the Tenant may make such repair or replacement and the Landlord shall reimburse the Tenant for the cost thereof. If the Landlord fails to pay such amount, then the Tenant may offset against the Rent due hereunder the amount so expended.
4. Alterations
"Modifications" delineates your privileges to adjust the leased establishment. You are allowed to effect changes without property owner assent, but substantial modifications become the owner's assets. You're at liberty to relocate personal belongings like racks or equipment as long as it doesn't impair the premises. Comprehending this provision can avert conflicts and assist you in configuring your enterprise arrangement effectively.
The Tenant may, at its own cost and expense and in a good workmanlike manner, make such alterations, additions, or improvements or erect, remove, or alter such partitions, or erect such racks, shelves, bins, machinery, furniture, fixtures, trade fixtures, equipment, and other personal property as it may deem advisable, without the consent of the Landlord. All fixtures and permanent alterations, additions, improvements, and partitions erected by the Tenant will be and remain the property of the Landlord during the Term, and will be abandoned by the Tenant at the expiration of this Lease. All racks, shelves, bins, machinery, furniture, equipment, and other personal property located in the Premises as of the Effective Date or otherwise installed by the Tenant may be removed by the Tenant at any time if the Tenant so elects. All such removals and restoration shall be accomplished so as not to damage the primary structure or structural qualities of the buildings and other improvements situated on the Premises.
5. Insurance
The "Insurance" provision safeguards both lessee and lessor. As the lessee, you necessitate property and liability insurance, designating the landlord as a supplemental insured party. The landlord oversees insurance for any damage to premises.
'Subrogation waivers' prevent insurance firms from seeking reimbursement from the opposite party following a loss. Your insurance provider should alert the landlord 30 days prior to policy cancellation. Getting a grasp on these conditions shields your business from financial risks.
(a) At all times during the Term, the Tenant shall maintain, at its sole cost and expense, policies of insurance containing the following insurance coverages (which policies shall name the Landlord as an additional insured):
(1) Property insurance with premiums paid in advance insuring the Tenant’s property using the standard Special Causes of Loss Form or equivalent for the full replacement value. The foregoing is referred to in this Lease as “Property Insurance.”
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(2) Commercial general liability insurance with respect to the Premises in amounts not less than $1,000,000 per occurrence, $2,000,000 aggregate limit using current ISO forms or equivalent.
(b) The Landlord shall obtain and keep in force during the Term of this Lease a policy or policies of insurance covering loss or damage to the Premises, in the amount of the full replacement value thereof, as the same may exist from time to time, but in no event less than the total amount required by lenders having liens on the Premises, against all perils included within the classification of fire, extended coverage, vandalism, malicious mischief, flood (in the event same is required by a lender having a lien on the Property), and special extended perils ("all risk" as such term is used in the insurance industry). Such insurance must provide for a payment of loss thereunder to the Landlord or to the holder of mortgages or deeds of trust on the Premises.
(c) The policies required by this section must provide for standard waivers of any right of subrogation that the insurer of such party may acquire against the other party to this Lease, for losses that are actually insured against, even if the loss results from a negligent act or omission. The Tenant’s insurance company must provide the Landlord with a certificate of insurance on form ACORD-27 (for Property Insurance required to be carried under this Lease), or its equivalent, and ACORD-25 (for liability insurance required to be carried under this Lease), or its equivalent, which provides that the insurance may not be cancelled without giving the named insured at least 30 days’ prior written notice (or at least ten days’ written notice of cancellation in the event of the non-payment of premium). The Tenant may carry any required insurance under a blanket policy if that policy complies with the requirements of this Lease.
6. Events of Default
The "Default Events" provision enumerates deeds that are deemed violations of your lease. Common occurrences embrace overdue rent remittances, encountering solvency concerns or non-compliance to lease stipulations. Stay alert to this segment and evade these snags to uphold a harmonious relationship with your proprietor and seamlessly operate your enterprise.
The following events will be deemed to be Events of Default by the Tenant under this Lease:
(1) The Tenant fails to pay any installment of the Rent hereby reserved when due, or any other payment or reimbursement to the Landlord required under this Lease when due, and such failure continues for a period of 30 days after the Tenant’s receipt of written notice of such nonpayment;
(2) The Tenant becomes insolvent, or makes a transfer in fraud of creditors, or makes an assignment for the benefit of creditors;
(3) The Tenant files a bankruptcy petition or Tenant is adjudged bankrupt or insolvent in proceedings filed against the Tenant;
(4) A receiver or trustee is appointed for all or substantially all of the assets of the Tenant; and
(5) The Tenant fails to comply with any term, provision, or covenant of this Lease (other than the foregoing in this section 18), and does not cure such failure within 30 days after written notice thereof to the Tenant, or such longer period as may be necessary to cure such default provided the Tenant has promptly commenced curing such default and is diligently proceeding to obtain such cure.
7. Holdover
The "Holdover" provision addresses scenarios when your lease duration is exceeded. If you fail to vacate by the culmination of your lease period, you'll be accountable for 125% of the regular lease for each holdover month. Ascertain comprehension of the expenditure linked to overstaying and devise your departure scheme accordingly.
If the Tenant holds over after the expiration of the Term and does not surrender the Premises prior to the expiration of the Term, then for each such month that the Tenant is holding over, the Tenant shall pay to Landlord 125% of the Rent due under this Lease for each month.
What happens when a Commercial Lease Agreement expires?
As a commercial lease agreement draws to a close, a few outcomes could transpire. Here's a handy guide to the potential scenarios:
- Choose to Continue or Conclude: Business lessees should determine whether to perpetuate or end their lease agreement significantly before its termination. Kickstarting this process 6 to 12 months ahead is viewed as a savvy move.
- Move to Month-to-Month: If the initial lease isn't extended or a fresh lease isn't formalized, the tenant might manage to shift into a month-to-month tenancy, assuming the landlord concurs.
- Landlord Assumes Possession: Sometimes, upon a commercial lease's expiration, the landlord might opt to inhabit the property themselves, either for dwelling or business aims.
- Possibility of Legal Proceedings: If complications arise around the lease's culmination, such as a tenant persistently lagging on rent payments or breaching lease terms, the lease's finale could result in legal interventions.
What are the penalties for breaking Commercial Lease Agreements?
Definitely, repercussions for terminating a commercial lease agreement may differ, but there are generally some usual penalties:
- Outstanding Rent: One of the primary consequences for breaching a commercial lease is that the tenant remains responsible for the unsettled rent for the lease's duration, even after leaving the property.
- Notification Period: The majority of commercial landlords require a notice period that spans 30, 60, to 90 days when tenants opt to break the lease.
- Early Termination Charges and Extra Expenses: Contingent on the lease agreement's details, commercial leases could impose termination fees, and the tenant might bear the costs for advertising for new tenants and potential cleaning expenses.
- Legal Ramifications: If the nature and circumstances of the breach lead to the exhaustion of in-lease grievance resolutions, the situation could escalate to legal action or conclude in a courtroom dispute.
Since specific penalties may vary according to the lease agreement, it is vital to meticulously examine the lease document to grasp the precise conditions surrounding early termination.